Saturday, February 18, 2006

Mortgage rates stayed near 6.25 percent this week, but gradually improved in the face of upward pressure from all news.

January economic data have been red hot, but so was the weather, and we really can't tell the extent of distortion by the warmth. The employment gain, the best month for retail sales in five years, the surge in new-home starts and construction permits, today's wholesale "core" prices up by double the Fed's target -- that combination should have pushed long-term rates to new highs.

Did not. The 10-year T-note approached the highs of last November, a now-crucial 4.68 percent, and fell back, by this morning all the way to 4.51 percent.

The whole world of finance paused for Fed Chairman Bernanke's first command performance on Wednesday, ready to buy, sell or hide on any hint of policy change. From the early-morning Web-posting of his remarks, to the end of Congressional questioning, the bond market stayed unchanged. Not a flicker.

Thursday, February 16, 2006

Miller-Samuel's Jonathan Miller has some comments on AVM's and Zillow.

"A few months ago, a national lender told me that out of the 10 major automated valuation services (AVM’s), 8 were totally unreliable, 1 was marginal and 1 was pretty good. This lays the groundwork for my initial skepticism about Zillow, but I am open minded. I think it will evolve and will have more strength in certain markets than others depending on the data they are fed."

Wednesday, February 15, 2006

You just have to check out www.zillow.com. This is a new website that gives you a free AVM on any piece of residential property in the USA.

AVM is short for an Automated Valuation Model. AVM's have been touted as the next best thing to sliced bread. They give you the value of a piece of real estate in an instant, without the time and expense of an appraisal. Except they are not an appraisal.

Zillow calls their product a Zestimate! And they are free!!. This is the brainchild of Richard Barton, the man that brought you Expedia.com. I don't know what the grand plans for Zillow are but they are getting real estate brokers licenses across the USA. It seems like they are going after the full service real estate company's.

The website just went live last week and already I had several calls from mortgage brokers telling me that Zillow.com says a house is worth "this and that" and they need this value to make their deals work. Yea these guys say so and it must be true! Except its not an appraisal.

AVM's take into account information that is available in public record. They track recent sales in a neighborhood and based on some secret formula, they are able to come up with a value. Banks use AVM's as support for low loan to value transactions. Such as you own a $550,000.00 house with a $175,000.00 existing mortgage and now you want to borrow 10 grand. So the value is off by $50,000.00, who cares?

The difference in having an appraisal is that a licensed professional will see the property. Individual homes vary widely in modernization and condition. The appraiser will select comparable's that are truly representative of the home being appraised. In addition the appraiser will verify that the comparable sale was an "Arms Length Transaction" and the sale was from the open market. Just a few things that a computer cant do.

So go to Zillow.com and get a Zestimate, Hey the price is right! Just don't call it an appraisal.